Experience the Eide Bailly Difference Wellness  Industry update and health reform rules 1

Contents Introduction Call to Wellness Wellness Program Timeline Wellness Program Initial Findings Patient Protection Affordable Care Act (Health Reform) Wellness Overview Applicable Health Insurance Plans Participatory Health-Contingent Conclusions 2

Introduction Why the call to wellness Where is wellness today Health Reform (ACA) regulations Where is wellness going and why Will / can wellness impact the health care spend 3 Although Most Americans believe Wellness will help, few participate because of the unknowns around reward and see risk in not meeting the goal

Call to Wellness – Current HC System Health care cost per capita rising much faster than other industrialized countries: 4 % of household income spent on health insurance 2010 uninsured rate = 20%

Call to Wellness – Current HC System Is rising health care cost per capita causing higher quality than other health care systems?

America’s Health Rankings is a 20 + year national survey conducted by United Health Group along with other community partners. Below is a listing of key challenges affecting the US: Obesity Diabetes Smoking Physical Inactivity Call to Wellness – Current Outcomes

Challenges Measures 7

Challenges Measures (continued) 8

Cadillac Tax Excise tax on “Cadillac” plans Starting in 2018 Essentially is a 40% excise tax on the differential between a health plan’s total premium and the applicable benchmark Single plan benchmark = $10,200 Non-single plan benchmark = $27,500 Example  $11,000 premium would be $800 over the limit and have a $240 tax per each enrollee in that plan 9

RAND Report Findings 50% of employers offer wellness promotion initiatives 72% characterize their program as combination of screening activities and intervention 80% screen their employees for health risks 77% offer lifestyle management programs 10

RAND Report Findings 50% of employers offer wellness promotion initiatives 58% offer disease management programs 11

RAND Report Findings Displayed below is the participation rates in select wellness program components: 12

RAND Report Findings Displayed below is the BMI percentage distribution in the RAND study: 13

Report More and more US employers are concerned lifestyle risks are resulting in increased employee illness, rising medical costs,and lost productivity 14

Report Employers are becoming more and more aware of the need to help their employees address these lifestyle risk factors: 49% of US respondents say wellness is essential 84% plan to increase support for these programs over the next 2 years 70% identify developing a workplace culture to better address lifestyle risk factors 15

Report Despite all this, participation remains low 50% participation on average in health assessment appraisals 20% for other lifestyle change and health management programs Weight management Tobacco cessation programs 16

Report Survey suggests there is 4 reasons for the lack of employee engagement Lack of clear strategy Lack of employee accountability Lack of effectiveness 17 What is causing so much stress? Employers believe it is a lack of work/life balance Survey suggests it’s the lack of guidance and support from managers and concerns over low pay or low pay increases What difference does the cause have on wellness?

Report 18 Following lists ways to build a culture of health Gaining commitment of senior leadership Developing a comprehensive strategy Identified population health issues, data, employee engagement Implementing employee engagement strategies Engage managers as role models Ongoing communication Reduce employee stress Ease access to high quality health care Understand health and productivity outcomes

Report 19 Why be highly effective in wellness? 25% lower BMI index 25% lower absenteeism Identified population health issues, data, employee engagement 40% more likely to have improved financial performance than their peers $1,600 differential in annual health care costs per employee between high and low performing organizations Harvard Bus Review - $4 return for each $1 spent on wellness

Wellness Timeline 1996 HIPAA – Premium discounts or rebates or modifications to OOPs for wellness programs in health plans 2006 DOL, HHS, & Treasury finalized regulations on HIPPA nondiscrimination and wellness provisions 2010 PPACA included additional wellness provisions Notes: 1 – HIPPA: Health Insurance Portability and Accountability Act, Pub. L , added section 9802 of the Code, section 702 of ERISA, and section 2702 of the PHS Act 2 – OOPs: Out of pockets which may include copayments, deductibles, and/or coinsurance 3 – 2006 Final Regulations: 71 FR – PPACA: Patient Protection and Affordable Care Act (Health Reform)

Health Reform Wellness Provisions Increase the maximum reward under health- contingent wellness program from 20% to 30% Increase maximum reward to prevent or reduce tobacco use to 50% Clarify reasonable design of health- contingent wellness programs and reasonable alternatives Plan years beginning after January 1,

Wellness Program Overview There are two types of wellness programs: Participatory  Incentives for simple participation Health Contingent  Incentives for action or outcome based on health factors 22 Health Factor was defined in the 2006 regulations as an individual’s health status and/or medical condition (medical condition is based on a culmination of claims experience, receipt of health care, and medical history) (lower risk) (higher risk)

Participatory Wellness Programs Wellness programs which do not provide a reward nor include conditions for obtaining a reward based on a health factor Examples of participatory wellness programs Reimbursement for employee gym membership cost Diagnostic testing program which rewards participation – not results Rewards employees for attending a no cost health education seminar Completing a health risk assessment and disclose results – irrespective of results 23

Participatory Wellness Programs Comply with HIPAA nondiscrimination if the program is made available to all similarly situated individuals regardless of health status Similarly situated individuals defined by: Bona fide employment-based classifications May also distinguish between plan participants Employees Dependents Spouses 24

Health-Contingent Wellness Programs Require an individual to satisfy a standard or outcome related to a health factor to obtain a reward Activity Only – Require employees to perform or complete an activity related to a health factor to obtain a reward Outcome Based – Require employees to attain or maintain a specific health outcome to obtain a reward 25

Activity Only Wellness Programs Examples include walking, diet, or exercise programs Not however required to attain or maintain a specific health outcome (participation only) Some individuals may be unable to participate in or complete the program due to a health factor May be unable to participate in a walking program Final regulations require these individuals be given reasonable opportunity to qualify for the reward 26

Outcome Based Wellness Programs Examples include: Smoking cessation programs Attaining certain results on biometric screening Maintaining or improving certain medical condition based on a health risk assessment (results matter) High cholesterol High blood pressure Abnormal BMI High glucose levels Rewards employees who are within a normal or healthy range while requiring employees outside normal to take additional steps 27

Health-Contingent Programs – Nondiscrim 5 requirements in order to qualify as a nondiscriminatory Program: 1. Frequency of Opportunity to Qualify: Opportunity to qualify for the reward is at least 1 time per year 2. Size of Reward: Reward cannot exceed 30% of total costs / 50% if tobacco wellness is included Total cost by plan type: single | single plus dependent | family Plans and issuers have flexibility to determine apportionment of reward amongst family members, reasonable requirement 28

Health-Contingent Programs – Nondiscrim 3. Reasonable Design: reasonably designed to promote health or prevent disease Reasonable chance of improving health or preventing disease Not overly burdensome Not a subterfuge for discrimination based on health factor Not highly suspect in method chosen Based on relevant facts and circumstances CDC’s Guide to Community Preventive Services Best Practice 29

Health-Contingent Programs – Nondiscrim 4. Uniform Availability and Reasonable Alternative Standards: Same reward be provided to an individual performing a reasonable alternative standard vs. the standard program Same full reward must be available under a reasonably alternative standard Plans and issuers have flexibility to determine whether to provide the same reasonable alternative standard for an entire class of individuals or on a individual-by- individual basis 30 Less Effort Less Reward More Effort More Reward Initial Plan Alternative Plan

Health-Contingent Programs – Nondiscrim 4. Uniform Availability and Reasonable Alternative Standards: some examples of alternative plans Education program  plan or issuer must make the education program available or assist the employee in finding the program – may not require individual to pay Time commitment  must be reasonable Diet program  Plan or issuer is not required to pay for cost of food but must pay membership or participation fee Physicians  if doctor says plan standard is not medically appropriate, the plan or issuer must provide a reasonable alternative accommodating the doctor Every individual participating in the program should be able to receive the full amount of any reward or inventive regardless of health factor! 31

Health-Contingent Programs – Nondiscrim 5. Notice of Availability of Reasonable Alternative Standard: Disclosure of availability of a reasonable alternative Contact information Statement that recommendations of an individual’s personal physician will be accommodated 32

Wellness Program Application Group health plans: both fully insured and self insured group health plans Grandfathered and non-grandfathered plans Excludes individual health plans Begin for plan years starting on or after January 1,

Honeywell, etc. Government sues Honeywell over wellness program (Star Tribune 10/29/14) Agency filing the suit said Honeywell violated the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act Employees will be penalized if they or their spouses do not take biometric tests Penalties Loss of $1,500 HSA contributions $500 medical surcharge $1,000 tobacco surcharge & additional $1,000 spouse surcharge 34

Conclusions Low participation in today’s wellness programs Those participating are seeing positive results in bending the health care cost curve Most wellness programs today are participatory only and not outcome-based PPACA enhanced incentives for outcome-based wellness programs from 20% to 30% | 50% for tobacco in a push to move towards this method Enhanced nondiscrimination rules for outcome- based programs – “reward for effort” Much room for growth in wellness programs! 35

Thank You Questions References: 1) The Commonwealth Fund: Health system performance and cost The Commonwealth Fund: Health system performance and cost 2) America Health Rankings America Health Rankings 3) Workplace Wellness Program Study: RAND Corporation Workplace Wellness Program Study: RAND Corporation 4) 2013/2014 Survey: Towers Watson 2013/2014 Survey: Towers Watson 36 These seminar materials are intended to provide the seminar participants with guidance in understanding the wellness incentives programs available through health reform. The materials do not constitute, and should not be treated as professional advice regarding the use of any particular wellness program. Every effort has been made to assure the accuracy of these materials. Eide Bailly LLP and the author do not assume responsibility for any individual's reliance upon the written or oral information provided during the seminar. Seminar participants should independently verify all statements made before applying them to a particular fact situation, and should independently determine the implications of any particular wellness program before implementation.